In the case of infringements of Article 14 of the MAR, the legislator distinguishes between criminal offences (section 119 (2) and (3) of the WpHG) and administrative offences (section 120 (14) of the WpHG).

Criminal offences

Principle: Punishable if committed intentionally

Insider dealing is a punishable offence under section 119 (1) and (3) of the WpHG. Via a cross-reference to Article 14 of the MAR, all types of offences referred to there are punishable under German law. This means that both independently engaging in insider dealing (section 119 (3) no. 1 of the WpHG) and recommending or inducing a person to do so (section 119 (3) no. 2 of the WpHG), as well as the unauthorised disclosure of inside information (section 119 (3) no. 3 of the WpHG) are punishable offences.

The legislator did not make any distinction with regard to the severity of the penalty when insider dealing is punished. For this reason, all insider dealing is punishable by imprisonment of up to five years or by a fine.

No criminal punishment is stipulated if the offence is committed negligently (but see section I.4.5.2), so it can only be punished if the offence was committed intentionally (section 15 of the Criminal Code (Strafgesetzbuch – StGB)). The person committing the offence acts intentionally if he or she is aware that the transaction in question is a transaction in financial instruments, he or she uses inside information and he or she acquires or disposes of financial instruments or cancels the order.

The concept of intent must consist of the fact that the information has not yet been made public. In addition, the person committing the offence must act on the understanding that, if it were to be made public, it is likely that this information would significantly affect the price of the financial instrument. It is sufficient for the person committing the offence to have recognised the circumstances constituting inside information and to seriously consider that they have the potential to have a significant effect on prices. By contrast, it is not necessary for the person committing the offence to be capable of accurately assessing the potential to have a significant effect on prices.

Under section 119 (4) of the WpHG, any attempt to commit insider offences is also punishable. Under section 22 of the StGB, it is classified as an attempt if the person committing the offence, based on his or her notion of the offence, immediately begins to complete the offence, i.e. if he or she performs an act which, in the event of an undisturbed course of events, will culminate, based on his or her intention, in the completion of the offence without any significant intermediate steps.

In the context of insider dealing, an immediate beginning can be presumed in any case when the order is placed or cancelled. With regard to the prohibition on disclosure, recommendation and inducement, this refers to the time when the person committing the offence starts submitting the information to the recipient, and hence gives up control of the further course of events.

Fact patterns that offer indications of infringements of the prohibition of insider dealing and of unlawful disclosure of inside information will be investigated by BaFin and, in accordance with section 11 sentence 1 of the WpHG, reported to the competent public prosecutor’s office if there is any suspicion of intentional insider dealing and/or unlawful disclosure of inside information.

Special case: Punishable offences relating to trading in greenhouse gas emission allowances

Under section 119 (1) and (2) of the WpHG, there are special criminal punishments for infringements of the MAR relating to trading in greenhouse gas emission allowances. This provision is therefore specific law that overrides section 119 (3) of the WpHG in this respect. Its application is opened up when there is a greenhouse gas emission allowance under Directive 2003/87/EC¹. Section 119 (2) no. 1 of the WpHG sets out that it is a punishable offence to intentionally submit, modify or withdraw a bid using inside information in the course of an auction of greenhouse gas emission allowances.

Under section 119 (7) of the WpHG, recklessly committing the offence within the meaning of section 119 (2) no. 1 of the WpHG is also punishable. In this case, the sentence is reduced to imprisonment of up to one year or a fine.

In turn, section 119 (2) no. 2 of the WpHG establishes, parallel to section 119 (3) of the WpHG, the prohibition of recommendation and inducement under insider law (section 119 (2) no. 2(a) of the WpHG) and the prohibition of disclosure under insider law (section 119 (2) no. 2(b) of the WpHG) in respect of greenhouse gas emissions. Only intentionally committed offences are punishable.

In contrast to section 119 (3) of the WpHG, however, section 119 (2) no. 2 of the WpHG only applies to the primary insiders referred to there in accordance with the second subparagraph of Article 38(1) of Regulation (EU) No 1031/2010.

Elements of administrative offences

If an act punishable under section 119 (3) of the WpHG, namely independently engaging in insider dealing, recommending or inducing a person to do so, and the unauthorised disclosure of inside information, is only committed recklessly, it is an administrative offence under section 120 (14) of the WpHG. A person acts recklessly if he or she disregards the duty of care to which he or she is subject, considering the particular circumstances of the case and his or her own personal abilities, although it should have been evident to him or her that this would result in an offence being committed. The administrative offence has a catch-all function. If it cannot be conclusively established whether the person acted intentionally or merely recklessly, the offence can be punished as an administrative offence.

In addition, section 120 (5) of the WpHG extends the prohibition of insider dealing by introducing further elements of administrative offences for insider offences in the area of trading in greenhouse gas emission allowances:

• Section 120 (5) no. 1(a) of the WpHG governs the intentional or reckless onward disclosure of inside information by a person within the meaning of Article 40 of Regulation (EU) No 1031/2010 in contravention of point (a) of Article 39 of Regulation (EU) No 1031/2010. Persons within the meaning of Article 40 of Regulation (EU) No 1031/2010 mean all persons who are in possession of inside information, to the extent that they know or ought to know that the information constitutes inside information.
• Section 120 (5) no. 1(b) of the WpHG punishes the intentional or reckless recommendation to or inducement of another person by a person within the meaning of Article 40 of Regulation (EU) No 1031/2010 to submit, modify or withdraw a bid in contravention of point (b) of Article 39 of Regulation (EU) No 1031/2010.
• In accordance with section 120 (5) no. 2 of the WpHG, the intentional or reckless failure to provide the insider list, or the incorrect or incomplete provision of the insider list, or not providing it in a timely manner, in contravention of the second or third sentences of Article 42(1) of Regulation (EU) No 1031/2010 constitutes an administrative offence. Under Article 42(1) of Regulation (EU) No 1031/2010, the auction platform, the auctioneer or the auction monitor are required to prepare an insider list, which must be regularly updated and transmitted to the authorities designated there.
• Section 120 (5) no. 3 of the WpHG governs the intentional or reckless failure to make the notification, or making an incorrect notification, or failure to make the notification with five working days, in contravention of Article 42(2) or Regulation (EU) No 1031/2010. This relates to the obligation of persons discharging managerial responsibilities within the auction platform, the auctioneer or the auction monitor, as well as persons closely associated with them, who are required by Article 42(1) of Regulation (EU) No 1031/2010 to notify the competent national authority of the existence of bids submitted, modified, or withdrawn on their own account relating to the auctioned products, or to derivatives or other financial instruments linked to them.
• Finally, under section 120 (5) no. 4 of WpHG, the intentional or reckless failure to make the notification, or making an incorrect or incomplete notification to the competent authority of the member state, or not making it in a timely manner, in contravention of Article 42(5) of Regulation (EU) No 1031/2010 constitutes an administrative offence. This states that any person referred to in Article 59(1) of Regulation (EU) No 1031/2010 who reasonably suspects that a transaction might constitute insider dealing is required to notify the competent national authority without undue delay.

Publication of measures and penalties under section 125 of the WpHG

Decisions on measures and penalties that were imposed due to the reckless infringement of the prohibition of insider dealing and of unlawful disclosure of inside information are published by BaFin on its website.

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